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Impact of Private Incidence of Corruption and Firm Ownership on Performance of Firms in Central and Eastern Europe

Author Info

Listed author(s):
  • Sandra Blagojevic
  • Jože P.Damijan

Abstract

The paper investigates how efficiency of business environment and corruption (informal payments and state capture) affect the microeconomic performance of firms. The novelty of the paper is to look at these effects in the interaction with the firm ownership. We use firm-level micro data collected by the Business Environment and Enterprise Performance Survey (BEEPS) for 27 transition countries for the period 2002-2009. Among other data, BEEPS collects also information on different corruption activities at the firm-level and firm ownership. We find somehow surprising results that private firms (domestic and foreign owned) are more involved both into informal payments as well as state capture activities. Our results also reveal that foreign owned firms that are involved in informal payments are likely to benefit from these corruption practices. On the other side, state owned firms are more likely to experience negative effects of involvements in corruption practices on productivity growth. After 2004, involvement of firms in corrupt practices diminished, and that their negative impact on firm performance dissipates indicating an improvement in the stability of business environment and law enforcement.

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File URL: http://www.econ.kuleuven.be/licos/publications/dp/dp310.pdf
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Paper provided by LICOS - Centre for Institutions and Economic Performance, KU Leuven in its series LICOS Discussion Papers with number 31012.

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Date of creation: 2012
Handle: RePEc:lic:licosd:31012
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Keywords: corruption; informal payments; state capture; institutional stability; firm ownership; firm performance;

Find related papers by JEL classification:

  • D04 - Microeconomics - - General - - - Microeconomic Policy: Formulation; Implementation; Evaluation
  • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
  • H10 - Public Economics - - Structure and Scope of Government - - - General
  • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
  • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
  • P37 - Economic Systems - - Socialist Institutions and Their Transitions - - - Legal

References listed on IDEAS
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Cited by:

  1. Colin C. Williams & Alvaro Martinez-Perez, 2016. "Evaluating the impacts of corruption on firm performance in developing economies: an institutional perspective," International Journal of Business and Globalisation, Inderscience Enterprises Ltd, vol. 16(4), pages 401-422.

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